Remarks by World Bank Group
President Jim Yong Kim at the
National Press Club Headliners
Luncheon
November 20, 2017

World Bank Group President Jim Yong Kim

National Press Club Headliners Luncheon

Washington, DC, United States

As Prepared for Delivery




Thank you, Mark for the introduction. And I want to thank the National Press
Club for the invitation to speak here today.
In the midst of frantic news cycles and competition for our attention, I want to
step back for just a bit and reflect on what we’ve been doing at the World
Bank Group to try to build new foundations of human solidarity, at a time when
those foundations are questioned and even under attack.
Peace and stability are critical to our efforts to grow economies and help
people lift themselves out of poverty. We recently launched a report that
surveyed 750 multinational investors and corporate executives. We asked
them – what are the biggest factors when you consider investing in developing
countries? The top three were political stability, security, and the right
regulatory environment – all of which are key areas of focus for our work.
I’ll start with the good news about the global economy. Growth is robust –
worldwide, the economy grew 2.7 percent this year. The second quarter of
last year saw the highest quarterly growth rates since 2010. Trade is picking
up. Around the world, millions of people each year are lifting themselves out of
poverty.
But this is also a time when multiple crises are in full swing, or looming:

•   Conflict, pandemics, climate change, and famine are impacting people all
    over the world, and contributing to an historic number of people being
    forcibly displaced;
•   Countries in nearly every region are turning inward;
•   International and home-grown terrorism affects every corner of the world.

It often feels like our increasingly interconnected world is, in fact, falling apart,
and countries and peoples are pulling away from each other.
The World Bank Group was founded to tackle just these kinds of challenges.
We have a specific mission and goals – which I’ll talk about later. As an
institution, we’re part of the post-1945 world order predicated on the notion
that what affects one city, one country, one region can have immediate and
lasting impacts on us all. That’s a notion that drives our work around the
world.
The global order that has helped ensure decades of relative peace and
prosperity was, in many ways, an American vision. Long before it was clear
that the Allies would win World War II, President Franklin Roosevelt began
looking ahead to the world beyond the war. He knew that it wouldn’t be
enough to shape the post-war order; the United States had to lead an effort to
build an entirely new system that wouldn’t just prevent world wars, but would
ensure a lasting peace.
Roosevelt knew that a stable global financial system was critical, so he tasked
his Treasury Secretary, Henry Morgenthau, to design it. The Treasury
Department’s plan – for a fund to oversee global financial stability, and a bank
to support reconstruction and development – was the foundation for what
became the IMF and the World Bank Group.
In the summer of 1944, as Allied armies were pushing through Normandy,
delegates from 44 countries gathered in Bretton Woods, New Hampshire for
an historic set of meetings. When Secretary Morgenthau opened the
conference, he said that the goal was to create
“a dynamic world economy, in which the people of every nation will be able to
realize their potentialities in peace…to raise their own standards of living and
enjoy, increasingly, the fruits of material progress… For freedom of
opportunity is the foundation for all other freedoms.�
For the past 70 years, that world order – the UN, NATO, the WTO, the IMF,
and the World Bank Group – has helped ensure relative peace and stability.
And from the very beginning, the mission of the World Bank Group has been
to help ensure opportunities for everyone.
The World Bank’s first mission was to fund reconstruction in Europe, but after
the Marshall Plan, the focus shifted to development and poverty reduction.
The institution grew and evolved into the World Bank Group that exists today
– a cluster of institutions that provides our client countries with specialized
financial tools and global knowledge to support their development efforts.
The very first institution formed in Bretton Woods is the International Bank for
Reconstruction and Development, or IBRD. IBRD uses its Triple-A rating to
issue bonds, borrow money on the capital markets, and provide loans to
middle income countries. It’s critical to invest in middle-income countries,
because they represent about one-third of global GDP, are major engines of
global growth – and that’s where more than two-thirds of the world’s poor live.
Another arm of the Bank is the International Development Association, or IDA,
which was founded at the request of President Eisenhower in 1960 to provide
concessional – close to zero interest – loans and grants to the world’s poorest
countries.
Our private sector arm, the International Finance Corporation, or IFC, invests
in the private sector in developing countries. IFC makes equity investments in
companies, uses tools such as first loss guarantees to de-risk sectors, and
creates markets to bring in other private sector investors.
Our Multilateral Investment Guarantee Agency, or MIGA, helps de-risk
projects, sectors, and entire countries by providing political risk insurance and
credit enhancement.
And finally, our International Center for the Settlement of Investment
Disputes facilitates arbitration between international investors. Over the past
two decades, ICSID has helped settle many disputes around the world,
including several related to NAFTA.
Every day, when World Bank Group staff enter our main building, they pass a
large sign at the entrance that reads, “Our dream is a world free of poverty.� In
different ways, each arm of the World Bank Group has helped millions lift
themselves out of poverty.
We’ve made great progress, especially over the past three decades. The
percentage of people around the world living in extreme poverty – living on
less than a dollar and ninety-cents a day – has gone from 35 percent to now
less than 10 percent. Nearly 1.1 billion people have lifted themselves out of
poverty since 1990. But there’s still so much work to do. Today, 767 million
people still live in extreme poverty.
To make that dream a reality, we’re using powerful financial tools. The World
Bank Group has always been an innovative financial institution. In 1981, the
World Bank invented the swap – where parties exchange cash flows to
achieve positions that better match their respective risk profiles. We use
swaps to mitigate currency risk and interest rate risk, and we’re developing
new derivative instruments to manage all kinds of risk such as commodity risk,
disaster risk, and weather risk.
For decades, the rich have been using sophisticated financial tools such as
leverage, swaps, derivatives, insurance. We’re using all of those tools – and
creating new ones – to serve the poor.
After I became president of the World Bank Group, we set two goals: to end
extreme poverty by 2030; and to boost shared prosperity among the poorest
40 percent around the world. And a year ago, I outlined the three ways we will
get there: by accelerating inclusive, sustainable economic growth; by building
resilience to shocks and threats; and by investing more – and more effectively
– in people.
The first pillar of our strategy is to accelerate inclusive, sustainable economic
growth.
Last spring I called for a new approach, where we maximize finance for
development by systematically crowding in private sector investment and
making it work for developing countries and poor people.
Everywhere we operate, we’re asking a very straightforward question: How
can we maximize the resources developing countries have to do the things
they must for their people, while minimizing the burden of public debt? We
answer that question by finding win-win solutions, where investors get a good
return, and countries utilize these resources to meet their development goals.
There’s never been a better time to crowd in private sector investment. Right
now, there’s more than 10 trillion dollars invested in negative interest rate
bonds; 24 trillion dollars in low-yield government securities; and 5 trillion
dollars sitting in cash, waiting for better investment with higher returns.
This approach is part of our ongoing effort to move toward market-based
development. When it came time to replenish our IDA fund last year, we
worked to secure a Triple-A rating for IDA, so that we can borrow from the
capital markets and boost IDA’s resources by 50 percent – without asking for
more money from donors.
The second pillar of our strategy is to build resilience to overlapping shocks
and crises.
We’re helping countries build resilience by finding new ways to share risks
with the capital markets. Too often when it comes to crises like pandemics, we
fall into a cycle of panic and neglect: we deal with outbreaks when they
become a global threat – and then we quickly forget about them after the
threat subsides.
This year, we took a large step to break that cycle with an instrument we call
the Pandemic Emergency Financing Facility. For the first time, we have actual
pandemic insurance – a 450-million-dollar policy that will automatically
disburse funds to the poorest countries when an epidemic reaches a critical
stage.
We learned a lot from the Ebola outbreak in West Africa – if we had had this
kind of instrument, we would have been able to disburse a 50 million dollar
cash window at the first sign of an outbreak to try to contain it. Larger sums
would have been disbursed if the pandemic grew worse, saving thousands of
lives and billions of dollars.
We can move faster to prevent pandemics. And now, for the first time,
pandemic risk in low-income countries is being shared with the financial
markets. Why can’t we do the same thing for famine, or other humanitarian
crises? I believe we can, and we’re working on it right now.
The third pillar of our strategy is to invest more – and more effectively – in
people.
Last month, we announced a new, accelerated effort called the Human
Capital Project. We’re partnering with some of the world’s best health
economists, and we’re using supercomputing power and new methods to
analyze and quantify the stock of human capital in the world and its impact on
economic growth.
We always knew that investing in people is the right thing to do; now we’re
learning that, economically, it may very well be the smartest thing to do. Over
the past year, we’ve done several different analyses, and we’re finding that
investments in human beings – especially in health, education, and social
protection – are far more powerfully correlated with economic growth than we
ever thought.
Too often, we still hear from leaders in developing countries, “First we’ll grow
our economies, then we’ll invest in our people.� Investing in
people is investing in economic growth. The Human Capital Project will
eventually include a ranking, which will be controversial. But I believe that we
have a moral responsibility to reveal to our shareholders the powerful
relationship between investing in people and economic growth. And more
importantly, we’re ready to help every single country rapidly accelerate the
quality and quantity of their human capital investments.
Some of you may wonder why I use the term “human capital.� I do so because
I want to communicate as clearly as possible with ministers of finance – this
isn’t charity; it’s about securing a country’s economic future.
All of these efforts are focused on ensuring equality of opportunity, so that
everyone around the world has a chance to achieve their highest aspirations.
Aspirations, linked to opportunity, can breed dynamism and inclusive,
sustainable economic growth. But if there’s no opportunity to achieve one’s
aspirations, rising frustration may very well lead countries down the path of
fragility, conflict, violence, extremism, and eventually migration.
As we work to end poverty around the world, the World Bank Group plays an
important role in maintaining stability, opening markets, and boosting
economic growth.
Global stability and open markets are critical for the United States. I grew up
in Muscatine, Iowa, and most of the people I went to high school with went to
work in small factories or on family farms. I talk to friends back home, and I
know that many people have fallen on hard times.
But the answer is not to turn inward. According to the U.S. Chamber of
Commerce, international trade supports more than 41 million American jobs.
Our work helps support those jobs and create new ones – more than 50
percent of U.S. exports are to countries where the World Bank has lending
programs, and where we’re helping open markets.
Crowding in the private sector in developing countries is the ultimate win-win.
A growing and robust private sector is a critical driver of economic growth, and
one of the keys to reducing poverty. We’re cultivating an economic and
business climate that allows U.S. companies to sell and compete in the
developing world.
One example is in Côte d’Ivoire, where cocoa exports are an economic
mainstay. For years, Ivorian farmers used dilapidated trucks because they
didn’t have credit to buy new vehicles.
So IFC, our private sector arm, teamed with Cargill, a Minnesota-based
company, to start the Cargill Co-op Academy, which trains farmers on
business skills, financial management, and best agricultural practices. IFC
supported a program that made affordable credit available to farmer co-ops
for new trucks and tractors.
Today, more than 120,000 farmers in Côte d’Ivoire have received training;
more than 66,000 farmers in 50 co-ops participated in the credit program; and
Cargill has a more dependable supply of cocoa. Cargill and IFC are working
on another joint venture to train more than 50,000 farmers in Cameroon.
Keeping markets open – and creating new ones – requires stability, so we’re
focusing even more of our work in areas of fragility, conflict, and violence. This
is critical to our goal of ending poverty: if current trends in conflict and
instability continue, we estimate that by 2030, 46 percent of the extreme poor
will live in Fragile and Conflict-affected States.
So, we’re innovating, with our private sector window in IDA, which will bring
more investment to countries affected by fragility, conflict, and violence. And
we’re working with partners like the UN to prevent conflict in countries at risk
of instability. In addition to the lives saved, if we could prevent conflict in
countries that bear the direct costs – casualties and losses to economic
growth – we would avoid over 34 billion dollars in losses per year.
This isn’t new work for the World Bank Group. In 1995, as war raged in the
former Yugoslavia, World Bank experts began preparing for post-war
reconstruction. Just days after the ceasefire, when the Serbian section of
Sarajevo was still in flames, a World Bank team landed on the ground and
began assessments. They quickly finalized an emergency recovery project of
160 million dollars, and when the Dayton Peace Accords were signed, the
Bank had helped line up 500 million dollars from donor governments to
accelerate reconstruction.
America’s military leaders understand the necessity of development partners.
Earlier this year, more than 120 retired generals and admirals affirmed in a
letter to Congressional leaders that,
“The military will lead the fight against terrorism on the battlefield, but it needs
strong civilian partners in the battle against the drivers of extremism – lack of
opportunity, insecurity, injustice, and hopelessness.�
The World Bank Group is often that partner. In places like Iraq, for example,
we’re supporting the government and finding new ways to bring private
investment into the country, even under difficult circumstances. Years of war
and neglect have damaged Iraq’s energy grid, leading to daily blackouts that
cripple the economy. We helped the government bring in 375 million dollars of
private financing to bring power to 3 million people in the Northern region.
That funding also supported the completion of the first phase of a new power
plant that will supply about half of Baghdad’s energy.
We do all of this with exceptional value for money. Over the last seven
decades, the international community has contributed 19 billion dollars to
capitalize and fund IBRD and IFC. Since 1945, the United States has invested
2.5 billion dollars.
We’ve been able to use those investments to fund more than 900 billion
dollars in loans and financing in developing countries, leverage 50 billion
dollars in reserves, and transfer 28 billion dollars to IDA and other programs
for the poorest countries. For every dollar that countries invest in the World
Bank Group, we’re able to have an impact that’s tens and even hundreds of
times more powerful than if they put their money in the form of grants directly
into government budgets.
For most of my adult life, I worked to provide health care to people in some of
the poorest parts of the world. The organization that I co-founded, Partners in
Health, has worked for three decades around a principle we call a Preferential
Option for the Poor.
Borrowing from Latin American Catholic Theology, a preferential option for the
poor required us to work to ensure that everyone in our communities of focus
had proper nutrition, healthcare, education, a safe place to sleep. When I
became president of the World Bank Group, I brought some of that philosophy
with me – a moral obligation to provide everyone in our client countries with
opportunities to achieve their highest aspirations.
Helping poor countries develop is not an exercise in charity – it’s an
investment in a stable, secure, more prosperous world. Improving stability in
countries emerging from conflict, and investing in poor countries wracked by
hopelessness and frustration are good for the entire world – including the
United States. As I said before, investors are looking, above all, for stability,
and we’re working towards that goal every day.
Let me make one other, less obvious point: strong American participation in
multilateral development is an opportunity to promote the principles that we
value as a nation: respect for self-reliance; equality of opportunity; openness
and fairness; and our regard for the beliefs, dignity, and aspirations of others.
Those principles are embedded in the foundation of our institution. In July
1944, Henry Morgenthau also told the delegates assembled in New
Hampshire that the new financial order would be based on an elementary
economic axiom – that “prosperity has no fixed limits. It is not a finite
substance to be diminished by division. On the contrary, the more of it that
other nations enjoy, the more each nation will have for itself.�
For seven decades, we have helped billions lift themselves out of poverty, and
we have contributed to maintaining peace and stability around the world. If we
have the right resources and fully commit to this effort, we can do the same
for decades to come, and help build a kind of world that we will be proud to
leave to our children.